@article{ART002672436},
author={Seyoung Park},
title={Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock},
journal={Asset Management Review},
issn={2288-6672},
year={2020},
volume={8},
number={2},
pages={1-25},
doi={10.23007/amr.2020.8.2.1}
TY - JOUR
AU - Seyoung Park
TI - Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock
JO - Asset Management Review
PY - 2020
VL - 8
IS - 2
PB - Institute of Management Research, SungKyunKwan University
SP - 1
EP - 25
SN - 2288-6672
AB - This paper derives the optimal asset allocation strategy for a representative economic agent (individual investor, fund manager etc.) with a large, negative uncertainty economic shock caused by the recent COVID-19 global pandemic that would have significant repercussions on the domestic/international socio-economic system in the post-coronavirus period. Specifically, the paper models the large, negative uncertainty economic shock by following Rietz’s (1988) rare disaster risk hypothesis and develops a quantitative model which can derive the optimal asset allocation solution of the representative agent who exhibits the CRRA (constant relative risk aversion) utility function within the utility maximizing framework. According to the theoretical and numerical analysis of the optimal consumption, optimal savings, and optimal investment strategies, the agent’s optimal asset allocation strategy with the large, negative uncertainty economic shock is to consume less, invest less in the risky stock, and save more in the risk-free bond than without the economic shock. Various theoretical and numerical results obtained from this paper which can consider extreme scenarios would contribute not only to the advance of asset management and risk management in the mid- and long-term of the post-coronavirus period, but also to the innovation of individual savings.
KW - Large Negative Uncertainty Economic Shock;Optimal Asset Allocation;Risk Management;Borrowing Constraint
DO - 10.23007/amr.2020.8.2.1
ER -
Seyoung Park. (2020). Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock. Asset Management Review, 8(2), 1-25.
Seyoung Park. 2020, "Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock", Asset Management Review, vol.8, no.2 pp.1-25. Available from: doi:10.23007/amr.2020.8.2.1
Seyoung Park "Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock" Asset Management Review 8.2 pp.1-25 (2020) : 1.
Seyoung Park. Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock. 2020; 8(2), 1-25. Available from: doi:10.23007/amr.2020.8.2.1
Seyoung Park. "Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock" Asset Management Review 8, no.2 (2020) : 1-25.doi: 10.23007/amr.2020.8.2.1
Seyoung Park. Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock. Asset Management Review, 8(2), 1-25. doi: 10.23007/amr.2020.8.2.1
Seyoung Park. Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock. Asset Management Review. 2020; 8(2) 1-25. doi: 10.23007/amr.2020.8.2.1
Seyoung Park. Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock. 2020; 8(2), 1-25. Available from: doi:10.23007/amr.2020.8.2.1
Seyoung Park. "Optimal Asset Allocation Strategy with a Large, Negative Uncertainty Economic Shock" Asset Management Review 8, no.2 (2020) : 1-25.doi: 10.23007/amr.2020.8.2.1
